PACCAR (NASDAQ:PCAR) reported fourth-quarter 2025 revenue of $6.8 billion and net income of $557 million, capping a full-year period the company described as its “fourth highest profit year” and its 87th consecutive year of profits. For 2025, PACCAR posted revenue of $28.4 billion and adjusted net income of $2.64 billion, with an adjusted after-tax return on revenue of 9.3%.
On the call, CEO Preston Feight said PACCAR Parts and PACCAR Financial Services each set quarterly and annual revenue records, and emphasized that both segments represent an increasing share of the overall business, contributing to “structurally stronger performance.” Management also pointed to recent policy clarity around tariffs and U.S. emissions rules as supportive for customer decision-making heading into 2026.
Tariffs and EPA 2027 clarity shaped the operating environment
Management highlighted that the Section 232 truck tariff policy, effective November 1, provided advantages for PACCAR given its “local for local” manufacturing footprint across the U.S., Canada, and Mexico. Feight also said it was confirmed late in 2025 that the 35-milligram EPA 2027 NOx limit will go into effect in January of next year, which he said helps customers finalize buying plans.
In the Q&A, executives discussed how Section 232 and manufacturing changes affected margins in the fourth quarter. They said a partial quarter of higher tariffs and production transitions created inefficiencies in Q4, while Q1 should reflect a full quarter of benefits and a more stable cost structure.
Truck market outlook: North America steady, Europe and South America ranges provided
Feight said U.S. and Canadian Class 8 retail sales were 233,000 units in 2025, with Kenworth and Peterbilt delivering a combined 30% market share. He noted that less-than-truckload and vocational markets were steady, while the truckload segment began to accelerate, with spot rates and customer demand picking up in December.
For 2026, PACCAR forecast U.S. and Canadian Class 8 market demand in a range of 230,000 to 270,000 vehicles, citing economic growth, regulatory and tariff clarity, and improving freight conditions.
In Europe, PACCAR said the 2025 above-16-ton market totaled 298,000 units, with 2026 registrations expected in a range of 280,000 to 320,000. In response to an analyst question, management said DAF’s heavy-duty market share for the year was 13.5%. PACCAR also cited South America’s above-16-ton market at 115,000 vehicles in 2025 and projected 2026 demand of 100,000 to 110,000 trucks.
Feight also noted DAF earned International Truck of the Year for the DAF XF and XD Electric trucks, and said it marked the third time in five years that DAF has won the award.
Margins and production: Q1 gross margin expected to improve despite flat deliveries
PACCAR delivered 32,900 trucks in the fourth quarter and said deliveries are forecast to be at a comparable level in the first quarter of 2026. Fourth-quarter truck parts and other gross margins were 12%, and management guided to 12.5% to 13% for the first quarter.
Asked why margins could rise with flat deliveries, executives cited several factors, including:
- A full-quarter benefit from Section 232 tariffs in Q1 versus only part of Q4.
- Reduced inefficiencies after factory schedule adjustments tied to “local for local” manufacturing changes.
- Lower overtime expected in Q1 compared with Q4, when the company pushed to complete year-end output.
- Improving order intake in December and January, which management said is supporting backlog and visibility for later quarters.
Management also said pricing in Q1 was expected to be “a little soft” amid competitive dynamics, but that cost reductions and tariff-related benefits should more than offset price pressure, resulting in a net positive price-cost relationship versus Q4. CFO Brice Poplawski added that materials comprise the “vast majority” of product costs—about 80% to 85%—with labor and overhead making up the remainder.
On production cadence, PACCAR said North America deliveries should be up somewhat in Q1, while Europe should be down modestly after higher year-end deliveries in Q4.
Parts and Financial Services set records; investments planned for technology and powertrains
President Kevin Baney said PACCAR declared dividends of $2.72 per share in 2025, including a $1.40 year-end dividend, and noted the company has paid dividends for 84 consecutive years. He said this equated to a dividend yield of “nearly 3%.”
PACCAR Parts posted record annual revenue of $6.9 billion, up 3% year over year, with pre-tax profits of $1.67 billion. Fourth-quarter parts revenue rose 4% to a record $1.7 billion, with pre-tax profits of $415 million. Baney said the company is investing in connectivity and “agentic AI” to increase vehicle uptime and customer success, and noted PACCAR Parts now has 21 distribution centers worldwide, including a new facility in Calgary.
Baney guided to parts sales growth of 4% to 8% in 2026, with first-quarter growth expected around 3% year over year and acceleration later in the year as truck activity improves. He also said tariffs could be favorable for parts, similar to trucks. In response to a question about profitability, Baney said fourth-quarter parts gross margin was 29.5% and discussed the impact of a maintenance-focused mix in a softer market, with expectations for improved mix as demand rebounds and proprietary parts increase.
PACCAR Financial Services also delivered records, with 2025 revenue of $2.2 billion and pre-tax income up 11% to $485 million. Fourth-quarter revenue was $569 million, with pre-tax income up 10% to $115 million. Baney said PACCAR Financial increased market share to 27%, up 2 percentage points versus 2024.
On capital allocation, Baney said PACCAR invested $728 million in capital projects and $446 million in R&D during 2025. For 2026, the company plans capital investments of $725 million to $775 million and R&D spending of $450 million to $500 million, with projects spanning next-generation clean diesel, hybrid and alternative powertrains, battery cells, connected vehicle services, flexible manufacturing, autonomous vehicle platforms, and advanced driver assistance systems.
Ordering trends, used trucks, and inventory positioning
Management repeatedly pointed to stronger order intake in December and January, describing January orders as running at “significant overbuild rate” levels. Executives said first-quarter production slots are “mostly full,” while order strength has been broad-based, including vocational demand, bodybuilder replenishment activity, and steadiness in the LTL market.
Executives also discussed dealer and industry inventory, saying industry Class 8 inventory stood at 3.2 months while PACCAR’s was 2.2 months, which management characterized as optimal. They said they expect builds and registrations to be “fairly aligned” in 2026 and noted dealers have begun placing stock orders.
On used trucks, management said values were up 4% year over year and suggested used pricing could rise further as the market anticipates higher new-truck pricing tied to emissions-related technology changes. Executives also described a temporary downtick in used demand related to CDL enforcement affecting some buyer segments, alongside ongoing fleet rationalization. They said they expect delinquencies to diminish as carrier profitability improves.
Regarding the EPA 2027 NOx change, management said it has been discussing a potential price impact with customers in general terms, citing a range of plus or minus $10,000 per truck as a planning figure, while noting some details around useful life and warranty could still evolve. Looking ahead, Feight said PACCAR intends to serve customers if demand rises, and the company reiterated expectations for sequential acceleration through 2026.
About PACCAR (NASDAQ:PCAR)
PACCAR Inc is a global technology leader in the design, manufacture and customer support of light-, medium- and heavy-duty commercial vehicles. The company’s products are marketed under well-known brand names including Kenworth, Peterbilt and DAF and span vocational and long-haul applications. PACCAR’s core business includes vehicle engineering and assembly as well as the supply of components and proprietary powertrain systems designed to meet regulatory and customer performance requirements.
In addition to truck manufacturing, PACCAR operates a comprehensive aftermarket parts business, distributes used trucks and provides commercial vehicle financing and leasing through its financial services operations.
